Bombay Stock Exchange building
The Bombay Stock Exchange building, Sep. 18, 2003.Reuters file

Indian stock markets rose almost two percent Wednesday tracking gains in Asian equities that rallied after the U.S. Federal Reserve said Tuesday that it would move slowly to raise interest rates in view of the risks to the U.S. economy. 

The rally on both the BSE and the NSE was broad-based. The S&P BSE Sensex closed at 25,338.58, up 438 points, or 1.76 percent, while the Nifty closed at 7,735.20, a gain of 138 points, or 1.82 percent. 

Tata Steel was the biggest Sensex gainer at 6.75 percent, followed by ICICI Bank (6.31 percent), Lupin (5.21 percent), Tata Motors (4.32 percent) and State Bank of India (4.25 percent).

Stocks that lost on an upbeat trading day included HDFC, M&M, Bharti Airtel and Maruti Suzuki.

Among sectoral indices, the BSE realty was the biggest gainer at 3.85 percent. The BSE Bankex gained 3.13 percent, followed by BSE Metal at 3.06 percent. Other sectoral indices that rose on the BSE included finance, industrials, consumer durables, auto, utilities, energy and healthcare.

On the NSE, the top Nifty gainers were ICICI Bank, Tata Steel and Lupin. The advance-decline ratio was skewed in favour of advances at 44. Gold ETFs also gained on the NSE.

Excerpts from US Fed Reserve chairperson Janet L Yellen's speech at the Economic Club of New York on March 29

  • In December, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate, the Federal Reserve's main policy rate, by 1/4 percentage point.
  • This small step marked the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery from the worst financial crisis and recession since the Great Depression.
  •  In my remarks today, I will explain why the committee anticipates that only gradual increases in the federal funds rate are likely to be warranted in coming years, emphasising that this guidance should be understood as a forecast for the trajectory of policy rates that the committee anticipates will prove to be appropriate to achieve its objectives, conditional on the outlook for real economic activity and inflation.
  • Readings on the U.S. economy since the turn of the year have been somewhat mixed. On the one hand, many indicators have been quite favourable. The labour market has added an average of almost 230,000 jobs a month over the past three months.
  • In addition, the unemployment rate has edged down further, more people are joining the workforce as the prospects for finding jobs have improved, and the employment-to-population ratio has increased by almost 1/2 percentage point.
  • On the other hand, manufacturing and net exports have continued to be hard hit by slow global growth and the significant appreciation of the dollar since 2014.
  • In addition, business investment has been held down by the collapse in oil prices since late 2014, which is driving an ongoing steep decline in drilling activity.
  • Low oil prices have also resulted in large-scale layoffs in the energy sector and adverse spillovers to output and employment in industries that support energy production.
  • If such downside risks (global growth and prospects for falling commodity prices) to the outlook were to materialise, they would likely slow U.S. economic activity, at least to some extent, both directly and through financial market channels as investors respond by demanding higher returns to hold risky assets, causing financial conditions to tighten.
  • If economic conditions were to strengthen considerably more than currently expected, the FOMC could readily raise its target range for the federal funds rate to stabilise the economy.
  • By contrast, if the expansion was to falter or if inflation was to remain stubbornly low, the FOMC would be able to provide only a modest degree of additional stimulus by cutting the federal funds rate back to near zero.
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